The manifesto of the ESOP man

So in one of my older posts i wrote about this man called Louis Kelso who is behind the Employee Stock Ownership plan. I finally managed to finish his book “The Capitalist Manifesto” (279 pg pdf takes 2-3 days to read and absorb).

This post is about that reading .. (Wait! don’t groan :P .. there is time for that).

He has been succesfully sidelined by the mainstream economists i think.. if it was not for the reading of that television elimination book by Jerry Mander i wouldn’t have known about Kelso. Sad!

Apparently he once told a reporter that his book is about “one of the most important discoveries in the history of mankind!” :D . It defintely is a important discovery.. “most” or not i don’t know.

The book discusses in detail about the problems with current day economics and makes some radical proposals.

• The fundamental argument is on these lines .. as time progressed technology has made “Capital” (Machinery and other such investment) a lot more powerful+productive than “Labour” .
• A lot of the wealth is now generated by the capital and very little by labour. Infact, as per author in the USA of the 60s ..90% of wealth was generated by capital and only 10% by labour. But the tragedy is that only 5% of the populace own this 90% capital.
• Now, what has been happening is .. the labour which is infact responsible for only 10% of the wealth keeps on demanding higher wages by attributing the increase in overall productivity to their labour while it was infact because of the capital. Not only that .. lop-sided government policies keep on pushing companies for higher labour employment whereas on the other hand technology is becoming more efficient and needs as little labour as possible.
• Infact, he criticises the taxation policies also which draw away a lot of income from the rich who got their income for their capital and distribute it to the poor who demand “just” wages for their labour. He calls this ridiculous because a man should get a wage as per his contribution to the economy.
• If you have contributed only by labour then you can’t expect to “steal” what someone else has legitimately earned by their “capital”. He says that these dynamics and more are responsible for all the inequality in the world, inflation, false promise of full employment, depression-recession cycles of economy etc.
• He says that the modern day solutions of “socialism”/”communism” or welfare-states that tax rich to pay poor etc are flawed ideas. His argument against communism is that .. it draws away the power of “capital” from everyone except the bureaucrats and government and makes everyone depend on “labour” which is infact worse than the present state. The argument against robbing the rich to pay the poor also has been mentioned already.
• He calls for a new form of capitalism called “Capitalism” (with capital C :) ) . The idea here is to move in exactly the  opposite direction from where communism has moved. To make everyone capitalists! . To distribute capital as freely as possible. Diffuse capital to all employees to make them all owners of capital etc. Thus the productive power of capital supplements the reliance of the employee on his own manual  labour.
• From here he goes on to make some more radical proposals like : (a) Zero corporate tax and tax only on personal income (b) 100% employee owned companies (c) Infact, he also talks about consumer owned companies elsewhere (not sure if it was in the book). Consumer Stock Ownership Plan also is an interesting idea.

My criticism: Obvly i am too small a fella to critique accomplished economists. But here are my thoughts from my first reading of “the Capitalist manifesto”. Afterall my blog is about  my thoughts :P . Clearly, the model of distributed ownership he proposed is in line with all those things that i have written about in the recent past .. be it Tagore’s Co-operativism via his Samavayaniti or Chesterton’s distributism and many other things. But to contrast with Gandhi’s Hind Swaraj and similar such books .. Kelso assumes that the supremacy of Capital over labour is good or that the supremacy of technology over our way of production is good while Gandhi was vehemently against technology that is against the growth of the soul. Also, there is very little that kelso talks about in terms of the damage to the environment and other sustainability issues of today caused by the techno-centric production. Agreed .. in 1958 it was perhaps very difficult to visualise all this. And then there is this inherent assumption that this path of “development” is correct and only the means of ownership and ways of distribution has to be changed. I think this part of the book is debatable.

The awesomeness of Kelso’s effort regarding ESOPs

So i wanted to finish my reading on Kelso ( that is him in the pic btw) for now by reading about the reasons for his so called failure and sidelining by mainstream economists. I stumbled upon this article titled “Fifty Years of Utopia: A Half-Century after Louis Kelso’s The Capitalist Manifesto, a Look Back at the Weird History of the ESOP” .

Like mentioned in the article.. from the birth of the idea of the ESOPs .. to the legislation regarding it .. to the vigorous lobbying related to it .. it was all done by one man .. “Louis Kelso”. This story makes a very interesting read. It also emphasises the impact a committed individual can make on economic policy.

Also happened to read some more on “when democratic ESOPs fail” .. very interesting read again.

Conclusion:All in all i have added one more name to the list of people who’s works have inspired me :) What i do with those inspirations is a very different thing :P . As of now i need a job for subsistence :D

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